Board Roles & Responsibilities: An Introduction

1. Board Roles & Responsibilities under Companies Act, 2013 & Clause 49 of Listing Agreement

2. An Introduction

3. BOARD – AN INTRODUCTION

4. Definitions Director appointed to the Board of a company “Director” Collective body of directors of the company “Board of directors” or Board “Director in the Whole Time Employment of the Company” “Whole Time Director” “Executive Director” means a whole time director.

5. Board Composition- Companies Act, 2013 Independent Director Women Director Resident Director Small Shareholder Director Board to have an optimum combination of executive & non-executive and not less than 50% of Board of Directors comprising non-executive directors.

6. Woman Director & Resident Director on the Board Board shall have at least one Woman Director on the Board by 1st April, 2015 Company is required to have at least one director on its Board as Resident Director who has stayed in India for a minimum of 182 days during the previous calendar

7. Number of Independent Directors on the Board Chairman of Board Non-Executive Director Executive Director 1/3rd of Board to comprise Independent Directors 1/2nd of Board to comprise Independent Directors If the Non-executive Chairman is a promoter of the company or is related to any promoter or person occupying management positions at the Board level or at one level below the Board, at least 1/2nd of the Board shall consist of Independent Directors.

8. Independent Directors (ID) on the Board • Qualifications of ID has been separately provided. • Nominee director not considered as ID. • Independent director to furnish declaration of independence on yearly basis • Appointment to be approved at a general meeting with explanatory statement justifying appointment • ID are not liable to retire by rotation and thus not taken in the limit of rotational directors; • ID is not entitled for stock options. • Familiarization programme for ID is introduced. • ID’s to conduct their separate meetings at least once in year. • Limited liability of ID

9. Role & Functions of Independent Director • Help in bringing independent judgement on issues like strategy, key appointments, etc. • Bring an objective view in performance evaluation of board & management • Safeguard interest of all stakeholders particularly minorities. • Determine appropriate levels of remuneration for ED’s, KMP & senior management • Balance conflicting interest of stakeholders • Satisfy themselves on integrity of financial statements & financial controls & system of risk management are robust • Scrutinize performance of management in meeting agreed goals • Moderate & arbitrate in the interest of the company in conflict situations

10. Duties of Independent Director • Undertake induction & regularly update skills • Seek clarifications & professional advice where necessary • Ensure their concerns about running of company are well addressed • Strive to attend and participate in all Board , Committee & general meetings • Be well informed about company & external environment • Do not unfairly obstruct the functioning of meeting • Pay attention & ensure adequate deliberation are held before approving RPT • Ascertain & ensure functioning of vigil mechanism • Not to disclose confidential information • Report concerns about unethical behavior , actual or suspected fraud

11. Small Shareholder Director on the Board Listed Company Suo Motto either Notice of atleast 1000 small shareholders/ 1/10th of total small shareholders, whichever is lower or May appoint a small shareholder director elected by small shareholders.

12. Maximum No. of Directorships • A person can be director in maximum 20 companies out of which maximum 10 can be public companies. • The directorships in private companies that are either holding or subsidiary of public companies are treated as public companies. • Alternate Directorship shall be included in calculating the maximum directorships limit. • Members by Special Resolution can specify any lesser number of companies in which a director can act as directors. • A transition period of 1 year is provided to comply with the requirement of maximum • no. of directorships. • An intimation of their choice of companies shall be given to the respective company • as well as to ROC.

13. Maximum no. of directors to be appointed in a company has been increased from 12 to 15. More than 15 directors can also be appointed by passing Special resolution. Maximum No. of Directors on the Board

14. DECISION MAKING BY BOARD

15. Board Meetings • Frequency of Board meeting: • Min. 4 meetings in a year with a maximum gap of 120 days between 2 consecutive meetings • Notice shall be sent to all the directors at least 7 days before the date of meeting • Notice may be sent, through electronic means or others • Notice of Board meeting shall specify theoption to attend the meeting throughvideo conferencing or through other audio visual means

16. Meeting through video conferencing • Participation through video conferencing or other audio visual means to be counted as quorum. • With respect to every meeting conducted through video conferencing the scheduled venue of the meeting as set forth in the notice convening the meeting shall be deemed to be the place of said meeting & all recordings of the proceedings at meeting shall be deemed to be made at such place. • Chairman required to make a roll call with respect to every director participating through video conferencing. • Company to send draft minutes to all directors within fifteen days of the meeting • Confirmation of accuracy of draft minutes by every directors who attended meeting within 7 days (or some reasonable time decided by the Board) of receipt of draft minutes, failing which it will be deemed approved.

17. Matters not to be dealt through video conferencing • Mattersnot to be dealt in meeting through video conferencing • To approve the annual financial statements; • To approve the board’s report; • To approve prospectus; • To approve merger, amalgamation, demerger, acquisition and takeover; and • Theaudit committee meetings for consideration of financial statement including consolidated financial statement, if any, to be approved by the Board under the Act.

18. Quorum for Board Meeting • Quorum for the Board Meeting shall be 1/3rd of total strength or 2 directors whichever is higher • Dis-interested quorum • If interested directors are 2/3rd of the board, dis-interested directors not less than 2 will form the quorum. • Interested Director • Director who in any way whether by :- • Himself; • Through relatives; • Firm; • Body corporate; • Association of individuals • in which he or any relative is partner/ director or member, interested in a contract or arrangement, entered into or to be entered into by or on behalf of company. • Meeting of Board to transact urgent business at shorter Notice : • Presence of at least 1 Independent Director required in the meeting called at shorter notice. • Else decision to be circulated to all the directors and to be valid only after ratification by at least one ID

19. Circular Resolution • Draft resolution to be sent to all directors whether in India or outside India • Draft Resolution may be circulated to the directors along with necessary papers by e-mail /fax /post /courier or by hand. • Approval of majority directors required, who are entitled to vote on the resolution • In case of 1/3rd or more Directors decide that the resolution shall be decided at the meeting, then the resolution shall be decided at the meeting and not by circulation • Circular resolution shall be noted at a subsequent Board meeting or committee meeting and shall form minutes of such meeting.

20. Powers of Board to be exercised in its meetings • Following powers shall be exercised by the Board only at their meeting:- • To make calls on shareholders in respect of money unpaid on their shares; • To authorise buy-back of securities; • To invest the funds of company; • Issue of Securities – Equity, Preference, Debentures; • Grant Loans, give guarantee or provide security in respect of loans; • Approve financial statements and Director’s report; • To make political contribution; • To diversify the business of company; • To approve amalgamation, merger or reconstruction; • To appoint internal auditors and secretarial auditors.

21. Powers of Board to be exercised in its meetings • To appoint or remove KMP or take note of appointment(s) or removal(s) of one level below KMP; • To take note of the disclosure of director’s interest and shareholding; • To buy, sell investments held by company constituting 5% or more of paid up share capital and free reserves of investee company; • To invite/ accept/ renew/ review/ the public deposits; • To take over a company or acquire a controlling or substantial stake in another company; • To review or change the terms & conditions of public deposits; • To approve quarterly, half early and annual financial statements or financial results.

22. CHANGING ROLE & STATE OF BOARD

23. Responsibilities of Board Board & top management to conduct themselves to meet the expectations of operational transparency to stakeholders Board should provide strategic guidance to the company, ensure effective monitoring of management & should be accountable to company & shareholders. Directors & key executives are required to disclose the Board whether they, directly, indirectly or on behalf of third parties, have a material interest in any transaction or matter directly affecting company. Maintaining confidentiality of information in order to foster a culture for good decision making

24. Responsibilities of Board Board should encourage continuing directors training to ensure Board members are kept up to date. Board should apply high ethical standards. It should take into account the interest of stakeholders. Board should treat all shareholders fairly. Board should be able to exercise objective independent judgment on corporate affairs.

25. Responsibilities of Board Board should have ability to “step back” to assist executive management by challenging the assumptions underlying: strategy, strategic initiatives, risk appetite. Board should consider assigning a sufficient number of non-executive Board members capable of exercising independent judgment to tasks where there is a potential of conflict of interest. In order to fulfil their responsibilities, board members should have access to accurate, relevant & timely information. When committees of the Board are established, their mandate, composition & working procedures should be well defined & disclosed by Board. Board & senior management should facilitate the independent directors to perform their role effectively as a Board member and also a member of a committee.

26. Role of Board Monitoring effectiveness of company’s governance practices & making changes as needed. Reviewing & guiding corporate strategy, major action plans, risk policy, annual budgets & business plans, setting performance objectives, etc. Aligning key executive & board remuneration with the longer term interests of company & shareholders. Selecting, compensating, monitoring &, when necessary, replacing key executives & overseeing succession planning. Ensuring transparent board nomination process with diversity of thought, experience, knowledge, perspective & gender in the Board.

27. Role of Board Ensuring the integrity of the company’s accounting & financial reporting systems & that appropriate systems of control are in place, in particular, systems for risk management, financial & operational control, and compliance with law & relevant standards. Monitoring & reviewing Board evaluation framework Monitoring & managing potential conflicts of interest of management, board members & shareholders, including misuse of corporate assets & abuse in related party transactions Overseeing the process of disclosure & communications.

28. Duties of Directors

29. SIGNIFICANT PROVISIONS RELATING TO BOARD

30. Restrictions on Powers of Board • Restriction for sale/ leasing of undertaking applicable to all classes of companies • Term “Undertaking” and “Substantial Undertaking” has now been defined • to invest otherwise in trust securities the amount of compensation received by it as a result of merger or amalgamation • Borrowing in excess of the paid –up capital & free reserves • To remit, or give time for the repayment of, any debt due from the director A special resolution is required to be passed instead of Ordinary resolution

31. Restrictions on non-cash transactions • Director of a company or of its holding/ subsidiary/Associate company or any connected person can not acquire assets for consideration other than cash from the company & vice versa. • Approval at a general meeting is required • If the Director or connected person is director of holding company then approval of holding company in general meeting is also required • Valuation of the assets by registered valuer

32. Prohibition on forward/insider dealing • Forward dealing in the shares and debentures of a company, its holding, subsidiary or associate by Directors and KMPs is prohibited • Both forward contracts and option contracts are banned • Securities acquired in violation to be surrendered to company • Restriction on Directors, KMP and any other person for indulging in Insider trading • Communication required in ordinary course of business or under law exempted

33. Related Party Transactions (RPTs) Following transactions are the related party transactions under Companies Act, 2013 and clause 49 of the Listing Agreement:- • Transfer of resources, services or obligations, regardless of whether a price is charged or not. • sale, purchase or supply of any goods or materials • Selling or otherwise disposing of, or buying, property of any kind; • Leasing of property of any kind; • availing or rendering of any services; • Appointment of any agents for purchase or sale of goods, materials, services or property; • Appointment of any related party to any office or place of profit in the company / its subsidiary company / its associate company; • Contract for underwriting the subscription of securities or derivatives thereof.

34. Role of Audit Committee in RPTs • Every related party transaction shall require prior approval of audit committee. • Audit Committee may grant omnibus approval for Related Party Transactions proposed to be entered into by the company as the criteria laid down by the Audit Committee subject to the following conditions: • Criteria for granting the omnibus approval shall be laid down • Transaction shall be repetitive in nature. • Omnibus approval should be in the interest of the company. • Such omnibus approvals shall be valid for a period not exceeding one year. • Review the details of RPTs entered into by the company pursuant to each of the omnibus approval given at least on a quarterly basis.

35. Approval of Board & Shareholder • Consent of Board of Directors and prior approval of shareholders by special resolution, if transaction or transactions to be entered into with related parties exceeding by such limit as prescribed under law. • Company is not required to take consent of the Board and approval of shareholders by way of special resolution if such related party transaction entered into by the company in its ordinary course of business and on an arm’s length basis • However, all material Related Party Transactions shall require approval of the shareholders irrespective of the fact whether the transaction is on arm’s length basis and on ordinary course of business.

36. Material Related Party Transaction What is Material Related Party Transaction? • A transaction with a related party shall be considered material if the transaction / transactions to be entered into individually or taken together with previous transactions during a financial year, exceeds ten percent of the annual consolidated turnover of the company as per the last audited financial statements of the company. • All existing material related party contracts or arrangements as on 1st October 2014 which are likely to continue beyond March 31, 2015 shall be placed for approval of the shareholders in the first General Meeting subsequent to October 01, 2014. What about existing Related Party Transaction/s?

37. Loans to Directors & Persons in whom directors are interested • No Company can directly/indirectly give loan/ security/ guarantee in favour of • Directors • Relative of directors • Any other person in whom director is interested • Exemption given to MD & WTD if as a part of conditions of service extended to all employees or pursuant to any scheme approved by members by Special Resolution • There is no facility of seeking approval of Central Government

38. Any other person in whom director is interested • Any director of the lending company, or of company which is its holding company or any partner or relative of any such director; • Any firm in which any such director or relative is a partner; • Any private company of which any such director is a director or member; • Any body corporate at a general meeting of which not less than 25% of total voting power may be exercise or controlled by any such director, or by two or more such directors, together, or; • Any body corporate, the Board of Directors, Managing Director or Manager, whereof is accustomed to act in accordance with directions or instructions of the Board, or any or director or directors, of lending company.

39. Loan & Investments • Loan, Investment and Guarantee allowed in : • Company • All persons (other than directors and person in whom director is interested ) • Body corporate • Limits : • By Board Resolution: • 60% of its paid-up capital, free reserves & securities premium account ;or • 100% of its free reserves & security premium whichever is higher • In case of exceeding above limits: By Special Resolution

40. NEW AND MANDATORY COMMITTEES

41. Audit Committee • Every Listed Company to constitute Audit Committee • Composition:- Min 3 directors with majority of ID • Audit committee to: • Recommend appointment, remuneration and terms of appointment of the auditors • Review and monitor auditor’s independence, performance and effectiveness of audit process • Examine financial statements and auditor’s report • Approve / modify the transactions of companies with related party • Scrutinize inter-corporate loans and investments • Monitor end use of funds raised through Public offers and related matters • Perform valuation of undertaking or assets of the company. • Evaluate internal financial controls and risk management systems 1 year transition period for constitution / reconstitution of Audit committee

42. Nomination & Remuneration Committee • Every Listed Company to constitute Audit Committee • Composition:- Min 3 Directors (all to be non-executive directors) ≥ ½ comprising IDs. • Nomination & Remuneration committee to :- • Formulate criteria for determining qualifications, positive attributes & independence of director; • Recommend to board a policy relating to remuneration of directors, KMP’s & other employees; • Identification of qualified Directors and senior management personnel • Performance evaluation of directors & Board; • Devising a policy on Board Diversity. 1 year transition period for constitution / reconstitution of Nomination & Remuneration committee

43. Stakeholder Relationship Committee • In Every Company having more than 1,000 share / debenture / deposit / security holders. • Composition:- to be decided by BoD. Chairperson to be an NED. • Mandate of the Committee:- • Consider and resolve the grievances of Securities holders.

44. Corporate Social Responsibility Committee • CSR Committee to be constituted (3+ Dir incl. at least 1 ID) • CSR Committee for promoting following CSR welfare initiatives • CSR Activities to be undertaken as projects or programmes excluding activities undertaken in pursuance of the normal course of business of a company • In the area nearby the operations of the company • May implement the same through trust/society set up by company or otherwise having track record of three years • Activities to be undertaken within India • Activities not exclusively for the benefit of employees or their family members • Nature of projects/programmes to be covered for eradicating extreme hunger and Poverty, for promotion of education…..etc as given in schedule VII

45. POLICIES OF BOARD

46. Corporate Social Responsibility Policy • CSR spend of at least 2% of avg. net profits made during 3 immediately preceding FYs • Networth ≥ 500 Crs or • Turnover ≥ 1000 Crs or • Net Profits ≥ 5 Crs COMPLY OR EXPLAIN • CSR Committee to be constituted (3+ Dir incl. at least 1 ID) • Committee shall formulate and recommend CSR policy and amount of expenditure as well as monitor CSR activities (CSR policy on web) • Preference to local areas in which the company operates • Activities specified in Schedule VII • To promote welfare Initiatives; • Sustainable Business Development; • More business opportunities; • Satisfied Stakeholders; • Long term future for your business. Board report to contain details about such policy development & initiatives taken by company during the year.

47. Nomination & Remuneration Policy Objective • Lay down criteria & terms & conditions with regard to identify persons qualifying for directors & senior management; • To determine remuneration based on company’s size & financial position; • To carry out evaluation of performance of directors, KMP, Senior Management Functional heads & the Board; • To have a diversified Board Scope • Applicable to the following in the company:- • Directors; • Key Managerial Personnel (KMP); • Senior Management Personnel, and • Other employees Disclosure • Such policy shall be disclosed in Board’s Report.

48. Material Subsidiary Policy Material Subsidiary • If the investment of company in subsidiary exceeds 20% of consolidated net worth as per audited balance sheet of P.Y; or • Subsidiary has generated 20% of consolidated income during the P.Y. • Except with the Special Resolution following transactions are not possible:- • Disposing shares of material subsidiary company which reduce its shareholding (either on its own or together with other subsidiaries) to less than 50% or cease exercise of control over subsidiary; • Selling, disposing & leasing of assets to more than 20% of assets of material subsidiary. • Note: Exceptions are also provided. Disclosure • Disclosure of policy on the company’s website; • Web-link to be provided in Annual Report.

49. Risk Management Policy Company to lay down procedure for risk assessment & minimization procedures. Board to be responsible for framing, implementing & monitoring the risk management plan. Company may constitute a Risk Management Committee to delegate monitoring & reviewing of risk management plan.

50. Whistle Blower Policy/ Vigil Mechanism Objective • Established to report concerns about unethical behavior, actual or suspected fraud or violation of company’s code of conduct or ethics policy. • Provides adequate safeguard against victimization who avail mechanism. • Provides direct access to Chairman of Audit Committee in exceptional cases. Scope • Applicable to the following in the company:- • Directors; • KMP’s; & • Stakeholders including individual employees & their representative bodies. Disclosure • Disclosure of such policy in Board’s Report; • Disclosure of details of establishment of mechanism on website.